Bill Ackman’s Holy War

Alan Murray – September 10, 2015 – Fortune

In his all-out fight against Herbalife, is the activist investor assuming the role of judge, jury, and executioner?

Activist investors play an important role in keeping business honest. They provide a check on free-spending CEOs and counter the inherent tendency of big companies to drift into bureaucratic sclerosis.

In his nearly three-year battle against Herbalife, however, activist Bill Ackman has done something entirely new. His goal has not been to improve the company but to annihilate it. And he is using every tool at his disposal—his wealth, his connections, his cozy relations with my colleagues in the press—to achieve that goal.

Conventional wisdom holds that hedge fund billionaires are driven by greed. Something else moves Ackman. If motivated by greed alone, he would have taken his profits and bolted long ago. Herbalife is his holy war, his white whale. He must kill it, whatever it takes, and he is utterly convinced of the righteousness of his cause.

He is righteous, but is he right? Herbalife has clearly engaged in some sleazy business practices in its history. But most of those seem to be in the past. Ackman claims to be working on behalf of those abused by Herbalife’s multilevel-marketing business model. But the victims are surprisingly difficult to find. He calls it a pyramid scheme. But pyramid schemes are by definition unsustainable, while Herbalife is in its 35th year.

Ackman is a smart guy, and perhaps he knows something we don’t. Even so, who made him judge, jury, and executioner? We have healthy—some would say too healthy—regulatory agencies in this country whose job it is to police such things. Do we need a billionaire hedge fund
investor in the game as well?

Don’t take my word for it. Read Roger Parloff’s deeply reported, scrupulously fair, and beautifully told account of this very bizarre corporate saga. Then draw your own conclusion.

From FORTUNE Magazine, September 10, 2015 © 2015 Time Inc. Used under license. FORTUNE and Time Inc. are not affiliated with, and do not endorse products or services of, Herbalife.

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